Nvidia Stock After Stock Split: Historical Data Allows Conclusions About Future Development

Nvidia has established itself as the ideal pioneer in the field of artificial intelligence (AI) for many investors. The company's graphics cards, known as GPUs, are seen as groundbreaking for accelerating complex data center tasks, such as training machine learning models and running AI applications. Since the generative AI application ChatGPT went viral at the end of 2022, Nvidia stock has seen a remarkable increase of 780%. This surge was a direct result of the significant rise in investments in AI infrastructure, from which Nvidia significantly benefited. Additionally, the company conducted a 10-to-1 stock split in June, after which the stock slightly fell by about 2%. Historical data, however, suggests that Nvidia's stock could fall further. Fundamentally, companies conduct stock splits after their shares have significantly appreciated, indicating compelling growth opportunities and competitiveness. Bank of America has researched and found that companies conducting a stock split achieve an average return of 25.4% within 12 months after the announcement. By comparison, the S&P 500 recorded an average return of 11.9% over the same period. For Nvidia, this could mean the following: After the announcement of the last stock split on May 22, 2024, when the stock was at $95 per share, the stock could rise to $119 per share by May 2025—a level that has already been reached, leaving neither upside nor downside potential in the next eight months. Looking at Nvidia's historical company performance after stock splits shows rather mixed results. The stock has lost an average of 23% in the first 12 months after five previous splits and was still down 3% on average after 24 months. Consequently, the price target in June 2025 could be around $93, based on historical trends. Current trading prices indicate a downside potential of about 22% in the coming nine months. However, it should be emphasized that past performance is no guarantee of future results. Additionally, Nvidia often suffered declines during previous splits due to economic downturns. Future investment decisions should be based on the company's financial performance and investors' willingness to pay. Nvidia continues to dominate the market for GPUs in the data center segment. The company accounted for 98% of all GPU deliveries for data centers and produced more than 80% of all AI chips in 2023. Two main factors contribute to this dominance: First, Nvidia develops the most powerful GPUs, and second, the CUDA ecosystem complements the hardware with extensive software libraries and developer tools, simplifying the creation of GPU-accelerated applications. Growth projections suggest that sales of graphics processors will grow annually by 27% until 2030, driven by the proliferation of machine learning and AI. Nvidia’s sales should develop similarly, possibly even faster due to share buybacks and margin improvements from pricing power. Wall Street predicts that Nvidia’s adjusted earnings will grow annually by 35% until the 2027 fiscal year, making the current valuation of 54 times earnings acceptable. Investors should consider buying a small position in Nvidia stock, provided they are familiar with volatility and willing to hold their shares for at least three to five years.